Money Laundering Compliance the Key Issues
We outline best practice for complying with the anti-money laundering regs – and advise that you keep on top of things
Anti-money laundering compliance often – understandably – takes second place to client work. However, it is important that you keep on top of the issues, to save a time-consuming and costly exercise in ensuring that you have complied with the procedures at a later date.
An annual review of your procedures may not be mandatory (depending on your supervisory authority), but it is a good idea to ensure that you are on top of the issue. We see many firms who have set up good procedures and then find they are not actually followed in practice. Conducting a brief annual review (including perhaps picking a client and ensuring the relevant identification checks and risk assessment have been undertaken) is a valuable exercise. Here we highlight the key areas you should consider in any review and highlight recent changes to whom reports of suspicious activity are actually made.
1. Do you have a MLRO (Money Laundering Reporting Officer)/ Deputy and is everyone aware of who this is?
You must by law formally appoint an MLRO (unless you are a sole practitioner). Although not mandatory it is very sensible to appoint a deputy so procedures do not break down if you are unexpectedly available. All staff and subcontractors should be aware of who this person is. Otherwise they are unlikely to fulfil their obligations as they may be discouraged from making reports or not know who to ask when problems emerge with client identification. We often ask staff at accountancy firms visit who their MLRO is – often this question is met with worryingly blank faces!
2. Have all relevant subcontractors and staff received recent training and has this been documented?
Have you checked to ensure that all necessary people have sat and passed the relevant assessments?
3. Do you have clear, tailored, appropriate procedures?
Again, do you actually follow these procedures in practice? If not, how can you ensure this occurs going forward?
4. Has client due diligence been completed and updated for all clients? Have you checked a sample?
Many supervisory bodies identify during their visits to firms that identification checks are undertaken at the start of the relationship with a client, but never updated. There is no point carrying out such checks and then archiving the information. This information should be accessible to all persons working on the assignment and updated as appropriate.
5. Do you retain records as appropriate?
You are required by law to retain records of how you identified and verified clients for five years after you cease to act for them. The Regulations also require firms to retain records of the work performed for clients, however, this is unlikely to place additional burdens on you, as the period does not exceed those already laid down by tax law and the requirements of most professional indemnity insurers.
6. Are you confident that reports have been made as necessary?
This is the big question. Has your MLRO received a report this year? Or ten? Or none? Or none in the past five years? How many reports should be made? This is a difficult question and one that will depend to a certain extent on chance – do you happen to act for a client who becomes involved in criminal activity? If you have made no reports, you can be reassured that this is actually the norm. Accountancy service providers made just 5,749 reports (out of a total of nearly 280,000) in the year to September 2012. However, firms with a strong compliance ethos and regular training of staff do identify many more reportable issues than those without. Hence this total number of reports should arguably be much higher. The question firms need to ask is would you expect more reports to have been made (globally or by particular departments) than is the case? If so, what additional training do staff members require?
Published December 2013